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Homework answers / question archive / 1)Dime a Dozen Diamonds makes synthetic diamonds by treating carbon
1)Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $120. The materials cost for a standard diamond is $60. The fixed costs incurred each year for factory upkeep and administrative expenses are $204,000. The machinery costs $1.5 million and is depreciated straight-line over 10 years to a salvage value of zero.
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2)Flag question 12. There are four primary roles of a bank: Select one: O a. asset management, retirement and saving planning, stocks broking and controlling the inflation. O b. asset management, foreign exchange management, funds management and determining the interest rates. O c. both A and B are correct. d. asset management, liability management, capital adequacy management and liquidity management. Next page
Select one: a. liquidity decreases and interest income increases. b. liquidity decreases and interest income decreases. O c. liquidity increases and credit risk increases. O d. implicit interest increases and explicit interest decreases. I
1.
Here you have provided with the data by using it you have to prepare the income statement and then derive the cash flow. Using discounted cash flow method then you have to calculate the net present value of this project and make decision whether to accept or reject this project.
Selling price per diamond and cost per diamond is given to you so you can multiply it with quantity and arrive at sales value and cost. Fixed cost is given. Depreciation can be calculated by dividing initial cost of machinery by its useful life years. you will have operating income by subtracting all expenses from sales then calculate the tax expense on operating income and subtract it from operating income you will get net operating profit after tax. (NOPAT)
Add depreciation to NOPAT which will give you cash flow. Discount the cash flow by using cost of capital which will give you present value of cash flows subtract the initial machinery cost from present value which will give you Net present value. If net present value is positive accept the project else reject.
2.
Answer : Correct Option is (d.) Asset Management,Liability Management,Capital Adequacy Management and Liquidity Management.
Reason :
Asset Management & Liability Management are managing the assets to decrease the risk of non payment of Liability on Time .Asset and Liability management is primary roles by bank.Capital Adequacy Management and Liquiditity management are also primary roles which the bank perorms.
